Wednesday, January 31, 2007

Econ 101

The following is lesson one in elementary economics from Dr. Walter Williams for ΛΕΟΝΙΔΑΣ's readers:

The first lesson in economic theory is that we live in a world of scarcity. Scarcity is a situation whereby human wants exceed the means to satisfy those wants. Human wants are assumed to be limitless, or at least they don't frequently reveal their bounds. People always want more of something, be it: more cars, more food, more love, more happiness, more peace, more health care, more clean air or more charity. Our ability and resources to satisfy all those wants are indeed limited. There's only a finite amount of: land, iron, workers and years in a lifetime.

Scarcity produces several economic problems: What's to be produced, who's going to get it, how's it to be produced, and when is it to be produced? For example, many Americans, and foreigners, too, would love to have a home or vacation home along the thousand miles of California, Oregon and Washington coastline. Shipping companies would like to use some of it as ports. The U.S. Defense Department would like to use it for military installations. There's simply not enough coastline to meet all the competing wants and uses. That means there's conflict over coastline ownership and its uses.

There are several methods of conflict resolution. First, there's the market mechanism -- let the highest bidder be the one who owns and decides how the land will be used. Then, there's government fiat, where the government dictates who gets to use the land for what purpose. Gifts might be the way where an owner arbitrarily chooses a recipient. Finally, violence is a way to resolve the question of who has the use rights to the coastline -- let people get weapons and physically fight it out.

At this juncture, some might piously say, "Violence is no way to resolve conflict!" The heck it isn't. The decision of who had the right to use most of the Earth's surface was settled through violence (wars). Who has the right to the income I earn is partially settled through the threats of violence. In fact, violence is such an effective means of resolving conflict that most governments want a monopoly on its use.


Francis W. Porretto said...

With all due respect for Dr. Williams, one of freedom's clearest and most eloquent voices today, there's an even more fundamental economic truth, that's hardly ever discussed:

Goods do not occur in nature.

Nature provides raw materials, which must be combined with intelligently directed labor to produce goods. At the minimum, a thing must be gathered from nature -- e.g., a low-hanging fruit must be plucked -- to become a good.

Because everything requires some aliquot of human effort to be made into a good, we may say with confidence that nothing is free. All goods carry a price of some sort. Because men value their labor and what it can obtain for them in infinitely varied ways, decisions about the relative values of goods, opportunities to produce or acquire them, and whether or not to trade them at specific rates of exchange, are all highly personal. Therefore, the only alternative to a market in which men make such decisions according to their own free judgment is a regime of coercion -- Communism.

In other words: Men must be free because nothing else is.

ΛΕΟΝΙΔΑΣ said...

You are correct and I believe Dr. Williams would agree with you. Freedom is however, always a matter of degree. Even in a totalitarian and communist society a degree of freedom exists if only within the minds of prudent and cleverly circumspect individuals. I believe that Dr. Williams is beginning his lecture using that assumption as a basis on which to construct his edifice.
More anon.